The State Corporations Act

3

Rev. 2010] State Corporations CAP. 446

LAWS OF KENYA

The State corporations Act

Chapter 446

Revised Edition 2010 (1987)

Published by the National Council for Law Reporting

with the Authority of the Attorney-General

www.kenyalaw.org

CHAPTER 446

THE STATE CORPORATIONSACT

ARRANGEMENT OF SECTIONS

Part I–Preliminary

Section

1–Short title and commencement.

2–Interpretation.

Part II–Establishment and Powers of

State Corporations

3–Establishment of state corporations by the President.

4–Ministerial responsibility for state corporations.

5–Powers generally of state corporations.

5A­­–Exemption.

Part III–Boards and Management of

State Corporations

6–Composition of Boards.

7–Power to issue directions and to remove Boards.

8–Meetings and procedure of Boards.

9–Committees.

10–Remuneration and expenses of chairman and members.

10A–Financial year.

Part IV–Control of the Finances, Etc. of

State Corporations

11–Annual estimates.

12–Expenditure not included in annual estimates.

13–Dealing with assets.

14–Books of accounts, records and audits.

15–Accountability.

16–Renewal of depreciating assets, etc. and disposal of

surplus funds.

17–Restriction on loans to Board members and staff.

18–Inspector-General (Corporations).

19–Powers of Inspector-General (Corporations) after

investigations.

20–Application for written reasons of Inspector-General

(Corporations)’s decision.

21–Appeals against decision of Inspector-General

(Corporations).

22–The State Corporations Appeal Tribunal.

23–Appeals to the High Court.

24–Payment and recovery of sums certified to be due.

25–Expenses of Inspector-General (Corporations).

Part V–The State Corporations Advisory Committee

26–Establishment of the Committee.

27–Functions of the Committee.

Part VI–Miscellaneous Provisions

28–Dissolution of State Corporations.

29–Offences and penalty.

30–Regulations.

31–(spent).

CHAPTER 446

THE STATE CORPORATIONSACT

Commencement: 1st November, 1986

11 of 1986, 18 of 1986, L.N. 248/1986, 13 of 1988, 11 of 1992, L.N. 56/2002,

2 of 2002, 12 of 2003, 3 of 2005.

An Act of Parliament to make provision for the establishment of state corporations; for control and regulation of state corporations; and for connected purposes

Part I–Preliminary

Short title.

L.N. 248/1986.

1. This Act may be cited as the State Corporations Act.

Interpretation.

2 of 2002, Sch.

2. In this Act, unless the context otherwise requires—

“Board” means the Board constituted in accordance with section 6 (1) or the body or person, by whatever name called, carrying out or empowered to carry out functions relating to the overall direction and management of a state corporation;

“chief executive” means the person appointed and employed as such under section 5 (3) or the person for the time being exercising the executive powers of a state corporation;

“Committee” means the State Corporations Advisory Committee established by section 27;

“Inspector” means the Inspector-General (Corporations) appointed as such under section 18;

“the Minister” means the Minister for the time being assigned ministerial responsibility for a state corporation and matters relating thereto by the President under section 4 and “parent Ministry” shall be construed accordingly;

“state corporation” means—

(a) a state corporation established under section 3;

(b) a body corporate established before or after the commencement of this Act by or under an Act of Parliament or other written law but not—

(i) the Permanent Secretary to the Treasury

incorporated under the Permanent Secretary

to the Treasury (Incorporation) Act Cap. 101;

(ii) a local authority established under the Local

Government Act Cap. 265;

(iii) a co-operative society established under the Co-operative Societies Act Cap. 490;

(iv) a building society established in accordance with the Building Societies Act Cap. 489;

(v) a company incorporated under the Companies Act Cap. 486 which is not wholly owned or controlled by the Government or by a state corporation;

(vi) the Central Bank of Kenya established under the Central Bank of Kenya Act Cap. 491;

(vii) (Deleted by 2 of 2002, Sch.).

(c) a bank or a financial institution licensed under the Banking Act Cap. 488 or other company incorporated under the Companies Act, the whole or the controlling majority of the shares or stock of which is owned by the Government or by another state corporation;

(d) a subsidiary of a state corporation.

“Tribunal” means the State Corporations Appeal Tribunal established by section 22.

Part II–Establishment And Powers Of

State Corporations

Establishment of state corporations by the President.

3. (1) The President may, by order, establish a state corporation as a body corporate to perform the functions specified in the order.

(2) A state corporation established under this section shall—

(a) have perpetual succession;

(b) in its corporate name be capable of suing and being sued;

(c) subject to this Act, be capable of holding and alienating movable and immovable property.

Ministerial responsibility for state corporations.

4. The President shall assign ministerial responsibility for any state corporation and matters relating thereto to the Vice-President and the several Ministers as the President may by directions in writing determine.

Powers generally of state corporations.

5. (1) Subject to this Act, every state corporation shall have all the powers necessary or expedient for the performance of its functions.

(2) After the commencement of this Act and notwithstanding subsection (1), the power of a state corporation to borrow money in Kenya or elsewhere shall be exercised only with the consent of the Minister and subject to such limitations and conditions as may be imposed by the Treasury with respect to state corporations generally or specifically with respect to a particular state corporation.

(3) A state corporation may engage and employ such number of staff, including the chief executive, on such terms and conditions of service as the Minister may, in consultation with the Committee, approve.

(4) A state corporation may, with the approval of the Minister in consultation with the Treasury and the Committee, establish pension, gratuity, superannuation, provident or other funds for the state corporation’s employees and their dependants.

Exemption.

2 of 2002, Sch., 12 of 2003, 3rd Sch.

5A. (1) Subject to subsection (2), the President may, by notice in the Gazette, exempt a state corporation, not being a state corporation established under section 3, from any of the provisions of this Act.

(2) Notwithstanding the provisions of subsection (1), an exemption granted under this section shall not exempt a state corporation from the provisions of sections 5, 10A, 11, 13, 14, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 or 29.

(3) Any state corporation eligible for exemption under this section which, immediately before the commencement of this section, was not subject to the provisions of this Act by virtue of—

(a) the provisions of the written law under which such state corporation is established; or

(b) a declaration in that behalf under paragraph (b) (vii) of section 2 (now repealed),

shall, subject to subsection (2), be deemed to be exempt from the provisions of this Act.

Part III–Boards And Management Of

State Corporations

Composition of Boards.

6. (1) Unless the written law by or under which a state corporation is established or the articles of association of a state corporation otherwise require, a Board shall, subject to subsection (4), consist of—

(a) a chairman appointed by the President who shall be non-executive unless the President otherwise directs;

(b) the chief executive;

(c) the Permanent Secretary of the parent Ministry;

(d) the Permanent Secretary to the Treasury;

(e) not more than seven other members not being employees of the state corporation, of whom not more than three shall be public officers, appointed by the Minister.

(2) Every appointment under subsection (1)(a) and (e) shall be by name and by notice in the Gazette and shall be for a renewable period of three years or for such shorter period as may be specified in the notice, but shall cease if the appointee—

(a) serves the Minister with written notice of resignation; or

(b) is absent, without the permission of the Minister notified to the Board, from three consecutive meetings; or

(c) is convicted of an offence and sentenced to imprisonment for a term exceeding six months or to a fine exceeding two thousand shillings; or

(d) is incapacitated by prolonged physical or mental illness from performing his duties as a member of the Board; or

(e) conducts himself in a manner deemed by the Minister, in consultation with the Committee, to be inconsistent with membership of the Board.

(3) No person whose membership of a Board has ceased in accordance with paragraphs (b), (c) or (e) of subsection (2) shall be eligible for appointment to any Board thereafter.

(4) Unless the written law under which a state corporation is established or the articles of association of a state corporation otherwise require, the Minister may, in consultation with the Committee, appoint one or more duly qualified persons, not being members of the Board, to be alternate members, and any one alternate member may attend a meeting of a Board in place of a substantive member who is unable to attend; and every alternate member shall, when attending a meeting, be deemed for all purposes to be a member of the Board.

Power to issue directions and to remove Board.

2 of 2002, Sch.

7. (1) The President may give directions of a general or specific nature to a Board with regard to the better exercise and performance of the functions of the state corporation and the Board shall give effect to those directions.

(2) Notwithstanding subsection (1), directions under this section may require that the memorandum and articles or any other documents establishing a state corporation, be amended to conform with any requirement of this Act where the same is inconsistent therewith.

(3) Notwithstanding the provisions of any other written law or the articles of association establishing and governing a Board, the President may, if at any time it appears to him that a Board has failed to carry out its functions in the national interest, revoke the appointment of any member of the Board and may himself nominate a new member for the remainder of the period of office of that member or he may constitute a new Board for such period as he shall, in consultation with the Committee, determine.

Meetings and procedure of Boards.

2 of 2002, Sch.

8. (1) After the commencement of this Act—

(a) the Board of every state corporation shall meet not less than four times in every financial year and not more than four months shall elapse between the date of one meeting and the date of the next meeting;

(b) a meeting of a Board shall be held on such date and at such time as the Board shall decide or, in the absence of such decision or on any occasion on which the chairman in consultation with the chief executive shall decide that a meeting is necessary, on a date and at a time determined by the chairman;

(c) no meeting of a Board shall be held at any place other than the registered or principal office of the state corporation except with the prior written approval of the Committee;

(d) unless three-quarters of the total membership of a Board otherwise agree, at least fourteen days’ written notice of every meeting of a Board shall be given to every member of the Board;

(e) the quorum for the conduct of business at a meeting of a Board shall be two-thirds of the total number of members of a Board or the number nearest to but not less than

two-thirds;

Provided that where within half an hour after the time appointed for the meeting a quorum is not present, the meeting shall be adjourned to the same day in the next week, at the same time and place, or at such other place and at such time as the members may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the members present shall be deemed to be a quorum.

(f) the chairman of a Board shall preside at all meetings of the Board but in the absence of the chairman the members present shall appoint one of their number to preside at the meeting;

(g) unless a unanimous decision is reached, a decision on any matter before a Board shall be by a majority of votes of the members present and in the case of an equality of votes, the chairman or the person presiding shall have a casting vote;

(h) every member of a Board who is likely to be interested, otherwise than as a member of that Board or who participates or is or may become entitled to participate directly or indirectly, in the profits from any contract or proposed contract or work done or proposed to be done for the state corporation, shall, on the matter coming before a meeting of the Board for consideration, immediately declare his interest therein and shall, unless the meeting otherwise agrees, retire from the meeting and shall in any case not be entitled to vote on the matter.

(2) The chief executive of a state corporation or an officer instructed by the chief executive in that behalf, present at a meeting of a Board or a committee thereof, shall have the right to require his opinion to be recorded in the minutes if the Board or the committee, as the case may be, passes a resolution, which in the chief executive’s or officer’s opinion, is contrary to his advice or contrary to law.

Committees.

9. A state corporation may establish committees consisting of members of the Board to deal with such matters as the Board may specify and notice of establishment of any committee in accordance with this section whether established before or after the commencement of this Act shall be served on the State Corporations Advisory Committee.

Remuneration and expenses of chairman and members.

2 of 2002, Sch.

10. (1) The chairman and members of a Board, other than the chief executive, shall be paid out of the funds of the state corporation such sitting allowances or other remuneration as the Board may, within the scales of remuneration specified from time to time by the Committee, approve.

(2) A Board may, within the scales specified by the Committee, refund travelling and other expenses incurred by the chairman or members of the Board in the performance of their duties.

Financial year.

12 of 2003, 3rd Sch.

10A. Notwithstanding anything to the contrary in any written law, the financial year of every state corporation shall be from the 1st of July in a year to the 30th of June in the next year.